Assessable value excludes separately recovered depot freight; minor stock variation without clandestine removal cannot sustain confiscation.

Freight recovered separately by debit notes for transport from the factory to the depot was not includible in assessable value where the depot operated as the place of removal, so the excise demand on that component was set aside. A marginal finished-stock excess of less than 2%, found on estimated verification and unsupported by any evidence of clandestine removal or intent to evade duty, did not justify confiscation or the resulting duty demand, so those consequences were also set aside.

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Issues: (i) whether freight component recovered by debit notes was includible in the assessable value for excise duty; and (ii) whether confiscation and consequential duty demand based on a small excess of finished stock was sustainable.

Issue (i): Whether freight component recovered by debit notes was includible in the assessable value for excise duty.

Analysis: The freight issue was governed by the settled principle that freight from the factory to the depot is not includible in assessable value where the depot functions as the place of removal and the transport charge is separately recoverable. The authority relied on the Supreme Court's ruling on valuation to hold that such freight did not form part of the assessable value in the facts of the case.

Conclusion: The freight component was not includible in the assessable value and the demand was set aside in favour of the assessee.

Issue (ii): Whether confiscation and consequential duty demand based on a small excess of finished stock was sustainable.

Analysis: The excess stock was found to be marginal, less than 2% of the recorded stock, and the stock verification was stated to have been made on an estimate basis. There was no allegation or evidence of clandestine removal or any intent to evade duty. On these facts, confiscation could not be justified merely on account of the small discrepancy.

Conclusion: The confiscation and related duty consequence on the excess stock were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded on both substantive issues and the impugned order was set aside with consequential relief.

Ratio Decidendi: Freight recovered for transport from the factory to the depot is not includible in assessable value where the charge is not part of the sale price at the place of removal, and a minor stock discrepancy without evidence of clandestine removal does not justify confiscation.

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